2023 (10) TMI 275 - HC - Income Tax

Re-assessment Notices Quashed: Officer Lacked New Info for AY 2014-15 & 2017-18, Writ Petitions Allowed.

IDFC Limited, IDFC First Bank Limited Versus The Deputy Commissioner of Income Tax Corporate Circle 1 (1), Chennai, The Assistant Commissioner of Income tax Corporate Circle 2 (1), Chennai

IDFC Limited, IDFC First Bank Limited Versus The Deputy Commissioner of Income Tax Corporate Circle 1 (1), Chennai, The Assistant Commissioner of Income ... Issues Involved:1. Assumption of jurisdiction for re-assessment for AY 2014-15 and 2017-18.2. Whether the officer had 'information' in terms of Explanation 1 to section 149, to proceed with the impugned re-assessments.3. Whether the officer had in his possession books of accounts or other documents or evidence that are represented in the form of an asset to conclude that income had escaped assessment.Summary:Issue 1: Assumption of Jurisdiction for Re-assessment for AY 2014-15 and 2017-18The petitioner, a Bank and an assessee, challenged the re-assessment proceedings for AY 2014-15 and 2017-18. For AY 2014-15, the original return was filed on 29.11.2014, followed by a revised return on 31.03.2016. The assessment order was passed on 29.12.2017 and was pending appeal. A notice under Section 148 was issued on 07.04.2021. The petitioner argued that the procedure under Section 148A, effective from 01.04.2021, was not followed, making the notice invalid. For AY 2017-18, a similar sequence of events occurred, with the original and revised returns filed on 30.11.2017 and 29.03.2019, respectively, and the assessment order passed on 30.12.2019. The notice under old Section 148 was issued on 30.06.2021. The petitioner contended that the re-assessment was beyond the statutory time limit and that the issues sought to be re-assessed had already been scrutinized.Issue 2: Officer's 'Information' to Proceed with Re-assessmentsThe petitioner argued that the officer did not have 'information' as per Explanation 1 to Section 149 to justify the re-assessments. The officer's reasons for re-assessment were based on financial records and materials already available during the original scrutiny. The court noted that the new scheme of re-assessment requires the officer to possess 'information' suggesting that income chargeable to tax had escaped assessment. The court found that the officer's reasons did not qualify as 'information' under the new provisions, as they were based on existing records and did not reveal any new material.Issue 3: Possession of Books of Accounts or Evidence Represented in the Form of an AssetThe petitioner argued that there was no asset representing the income that allegedly escaped assessment. The revenue contended that suppressed income or wrong claims of disallowances constituted an asset. The court held that the officer did not have any new material or evidence indicating an asset that led to the inference of escapement of income. The court also noted that the amendment to Section 149 by Finance Act 2022, effective from 01.04.2022, includes situations such as the present, but it cannot be applied retrospectively.ConclusionThe court quashed the impugned notices and proceedings for re-assessment for both AY 2014-15 and 2017-18, finding that the assumption of jurisdiction was not justified. The court emphasized that re-assessment must be based on new and tangible information, which was not present in this case. The writ petitions were allowed, and the miscellaneous petitions were closed. No costs were awarded.